Banks to reimburse up to £415,000 on APP fraud claims

The Payment Systems Regulator (PSR) has outlined new consumer protections for people who have been tricked into transferring money to scammers will be able to receive up to £415,000 back per claim under new fraud requirements coming into force next year,

The measures are is in line with the maximum award the Financial Ombudsman Service can make when considering complaints. This is an important decision for both consumers and industry and it involves difficult trade-offs. As a result, the regulator will monitor the incidence and impact of high value APP scams over the next ten months before the reimbursement requirement start date.  

The PSR also confirms that ‘sending’ payment firms can – but do not have to – apply a claim excess of up to £100 if they choose to. This does not include claims made by vulnerable consumers. 

Consumers still need to take care when making payments. Reflecting this, the PSR also set out the circumstances when a bank might reasonably consider a person has not been sufficiently careful. For example, consumers should have regard to interventions (such as warning messages) from their bank; should promptly notify their bank of suspected fraud; share information with their bank to help them assess a claim; and consent to fraud details being reported to the police.  

It will not be sufficient for a customer to have merely failed to meet one of these requirements, and the onus will be on the bank to prove that they acted with gross negligence. This is a very high bar, and the PSR expects that a small minority of cases will be subject to this exception. This exception does not apply to vulnerable consumers.   

The PSR’s final decisions strike the right balance between encouraging people to be careful while making sure there are high levels of protection – particularly for those who lose larger sums of money to APP fraud. 

Industry must comply with these obligations from 7th October 2024. The PSR wants to see people be protected from APP scams as quickly as possible, but recognises the need to ensure the critical systems needed to support the requirement must be in place.  

Chris Hemsley, the PSR’s Managing Director, said: “The action we’re taking significantly increases the level of protection for people and puts the UK at the forefront of APP fraud protections globally. Our approach incentivises banks and other payment firms to prevent APP fraud from happening in the first place while ensuring victims are protected in a consistent way. ”

“Payment firms are already getting ready by improving fraud controls and more people are getting their money back. We now expect the momentum to implement the full protections to increase.”

“We’ll be working closely with Pay.UK and payment firms to make sure they’re fully prepared to implement the new requirement next year.”   

Emma Lovell, Chief Executive at the Lending Standards Board said “While mandatory reimbursement for Authorised Push Payment (APP) fraud is welcome, we cannot lose focus on the importance of fraud prevention – the only way to truly prevent customer harm from occurring. Unlike the incoming framework, the existing Code requires signatory firms to take steps to prevent APP fraud from happening in the first place. It is vital that progress made in these areas does not fall away after October 2024. Alongside the new reimbursement rules, there is a clear need for a new APP Fraud Prevention Standard, overseen and enforced by an independent body, to ensure the industry has a consistent approach to stopping scams.”

“APP fraud means people are navigating a minefield of threats every time they shop online, click a link, or answer a call – with this type of fraud becoming increasingly complex, widespread, and convincing. As well as a financial impact, victims of fraud can also suffer devastating emotional repercussions.

“Reimbursement alone cannot reverse the emotional distress that APP fraud causes, nor can it prevent the proceeds of fraud from being channelled towards criminal activity. Without a consistent approach to prevention, the risk is that APP fraud – and consumer harm – will accelerate again.”